Steve Faktor is author of Econovation, futurist, and founder of IdeaFaktory, which helps companies create and commercialize big innovations. He is co-founder of Upcelerator, a network for selling and acquiring startups. Steve is a popular keynote speaker, LinkedIn Influencer, and regularly featured in Forbes, Harvard Business Review, NPR, Wall Street Journal, among others. Steve is the former head of the American Express Chairman’s Innovation Fund and executive at Citi and MasterCard. You can follow him via email newsletter, LinkedIn,Facebook, Twitter, and Google+.

Microsoft's Nuclear Option for Mobile

The new market share numbers are in for Windows Phone and they’re brutal. According to Kantar Worldpanel, Microsoft’s share dropped from 4.7% to 3.6% in the US by May 2014 vs last year. It’s also declining in Germany, flat-lining in Brazil, and completely vanishing in China. To a heated, two-horse race, Microsoft brought a donkey. That doesn’t mean there’s no hope. After all, how would Juan Valdez get all those coffee beans without his trusty burro?

I’ve written extensively about the mobile wars and work with companies fighting them. I sincerely believe Microsoft has one last shot to make it in mass-market mobile. It’s one of five strategies I proposed on Feb 3, 2011…before the Nokia partnership. The difference? Today, those five choices are down to one: The XPhone.

First let’s look at where mobile platforms are moving.

Mass-market and emerging markets: Google is sweeping up at the low end. With the exception of Samsung, an army of nameless, faceless, profitless Asian clone manufacturers are flooding the world with cheap Androids, a license-free operating system. This bodes well for emerging consumers, Google, and service providers who will eventually show up on those phones. It’s a race to the bottom for most of these manufacturers and Samsung, HTC and LG know it.

The High End: While still growing, Apple doesn’t yet have an answer for emerging markets. It is on a trajectory to dominate a super-profitable minority share of mobile. One manufacturer with a handful of models can’t compete with a massive, low-end ecosystem. Of course minority status means Apple’s ability to enter new, mass-market categories like payments, will get progressively harder. Though it, like Google, are moving hard into health data and connected devices. From the demographics, perhaps Apple’s affluent customers have more stuff to monitor, protect and measure. I’ll write more on that in a forthcoming mobile report. (Subscribe to get notified here.)

Also-Rans: The low-end is exactly where most upstarts have gravitated. FirefoxOS is targeting super cheap phones that can practically come out of a dispenser. Microsoft offers cheap, colorful and highly competent Nokias at low prices. It even experimented with an Android or two. They offer zero value to existing iPhone or Android owners. People aren’t going to abandon their existing apps and services to maybe find alternatives in Microsoft’s cavernous, lonely app store. And, no consumers, no developers. It’s a vicious Catch-22.

These days. Blackberries are kryptonite to almost anyone outside of banking or other regulated mobile prisons. So the company is forced to run Android apps on its devices and re-focus its strategy on Blackberry Messenger. Who knows, maybe Facebook will offer them a few billion if they acquire enough corporate sexters.

There are others not worth writing about: Samsung’s Tizen, Ubuntu (!?), etc. So I won’t.

Niches: As I wrote in early 2011, there were still under-served segments.

In 2011, phones had an inferior multimedia experience. Since then, mobile streaming services like Spotify and Netflix have filled some of the void.

Businesses were under-served on mobile – and in some ways, still are. But they are getting by with iPhones and Androids, which double as personal devices. Since the NSA scandal, there is a security-centric OS niche that companies like Blackphone are pursuing. For some very obvious reasons, I don’t think Microsoft will be trusted to capitalize on that niche. Neither is Google or any American telco.

A third group remains: gamers. There are many casual gaming options for iOS and Android, but little for serious gamers. This is where I thought Microsoft had an edge. But time is running out. Xbox was a juggernaut with a passionate fan base. But console gaming will die soon. Every device will be powerful enough to stream any game.

XPhone: The advantages Microsoft still has in this space are beloved game brands, an ecosystem of game developers, and experience in hardware. It won’t be easy, but it can be done. A foothold in mobile gaming could establish a strong nucleus of passionate users that can expand outward to the mass market. It’s too late to start the other way around. Of course, that means abandoning the Microsoft branding. From now on, it’s XPhone or bust.

You can read more of my thoughts of what I thought Microsoft’s Xphone should look like. Of course, that was 3.5 years ago. Today, they need to be far more adaptive in partnering or acquiring hardware and gaming companies that can give them an edge. They will also need a mind-blowing mobile content strategy with a mix of new and classic gaming exclusives – from companies like Sega, Nintendo, Atari and beyond.

The time for bringing lamb shanks to the picnic is over. Everyone already ate. But everyone makes room for dessert.

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